Daily Brief

Daily Brief

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Weakness in China and Europe

USD

During most of Thursday, action involving the USD was low-key. The trade narrative continued to be unusually softly-spoken and, overnight, China cut - albeit temporarily- its retaliatory tariffs on US vehicle imports. Even the US economic data were low-key. Initial jobless claims were fewer than forecast although continuing claims edged higher. The Bureau of Labor's import and export price indices both moved lower in November, import prices by 1.6% and exports by 0.9%.

This morning as Europe opened the USD pushed higher on most fronts, ostensibly as a result of weaker than expected data from China, where retail sales and industrial production both came in well below forecast.  

EUR

European Central Bank (ECB) president Mario Draghi set the tone for a softer EUR on Thursday when he held a press conference to announce the end of the bank's quantitative easing (QE) asset-purchase program. The end to QE had been well-signalled but Sig. Draghi's tone was more dovish than investors had bargained for and the ECB also lowered its growth forecasts for the euro zone.

Concerns about Euroland growth were thrown into sharp focus this morning by the provisional purchasing managers' index readings from around Europe. Every one of the measures from France, Germany and pan-Euroland was lower on the month and below forecast. All three of the French figures - manufacturing, services and composite - came in below the breakeven line at 50, indicating a slowing economy. The EUR took a swift half-cent dive, leaving it 0.7% lower on the day.

CAD

After going nowhere on Thursday the CAD began to head lower during this morning's Far East session. All the commodity-oriented currencies were hurt by Chinese data for retail sales and industrial production which came in much weaker than expected, indicating problems at both ends of the economy.

The CAD took less damage than the AUD and NZD but it is still 0.3% lower on the day against the USD. On Thursday the only Canadian ecostat was the New Housing Price Index, which was unchanged in October and just 0.1% higher on the year.

GBP

Sterling had a definite downward tilt but it did not move far during the New York session. There were no UK economic data to affect it this morning and no remarkable developments in the Brexit story. The GBP is 0.6% lower on the day.

When Theresa May met with the other European leaders in Brussels she had been hoping they would cut her some slack on the details of the withdrawal agreement, specifically with regards to the Irish border. They refused to do so. Therefore the prime minister is in the same bind as before, trying to get a bill through parliament which she knows does not have the support of MPs. The EU has given her until 21 January to get something agreed but it is not clear how she will be able to square that circle.

JPY

Japan's Nikkei manufacturing sector purchasing managers' index this morning was the only one to show an improvement on the month. It went up by two ticks to 52.4. Industrial production increased by 2.9% in October, putting it 4.2% higher than the same month last year.

The JPY was only briefly affected by the weak Chinese economic data. It is virtually unchanged on the day against the USD

USD mostly higher as China slows

USD mostly higher as China slows

EUR lurches lower after PMIs all disappoint

EUR lurches lower after PMIs all disappoint

CAD a little lower on Chinese economic data

CAD a little lower on Chinese economic data

GBP suffers renewed Brexit uncertainty

GBP suffers renewed Brexit uncertainty

JPY unchanged, despite PMI uptick

JPY unchanged, despite PMI uptick

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